I really think that both 720/PS4 (or whatever their going to be called) are going to be scaled systems next time around, based on the same (or rather enhanced) architecture, kind of brute forced like the manufactures of PC components have done many times over the years, it makes sense, speed up the current systems CPU's, add more cores/spu's, bigger hdd's, more memory which dev's are always crying out for tbh, drop in a more current GPU, and you have a much better system at the fraction of the cost of developing a system based on all new architecture, plus being based on essentially the same architecture it will be better for the gaming industry as dev's won't have to get to grips with a completely new software development kit, but rather an enhanced SDK with a familiar tool set, so hopefully dev's will be able to push the envelope on games even further,
Also I would hope that this would mean both systems would be natively compatible with their last systems software catalogue, and maybe even enhance the performance of those older games, I really hope this is what is going to happen becuase then I will feel that the new systems are more of an upgrade than a complete change, that will make it a lot easier for me to swallow, and I think it will be better for the industry as a whole, I know most of this is just conjecture but I believe this is what is going to happen, I imagine in the future that eventually both the PS3 and 360 will transform into set top box's, I think by then the hardware war will become almost non-existent with both systems being practically identical in terms of performance, (almost what we have atm tbh).
The real war will be the content and services they will be offering on-line, kind of like virgin vs sky, now and again new set top box will be released and you'll be able choose to upgrade if you wish, you'll have access to the same services etc but becuase you'll have a newer box will have exclusive access to newer games and content that only your new set top box can play, I think this way it will become a seamless, ever evolving service from both Sony and MS, we know eventually that all games will be available on-line in the near future anyway,
Sony have already said that this is the route that they want to follow, rumour's are that in the next complete overhaul of the PSP they are going to drop the UMD drive, which makes sense tbh and shows the direction that they want to travel in, games sold exclusively on-line practically stamp out piracy, there's also a much higher profit margin becuase of less overheads and no manufacturing costs etc.
Call me crazy but I really think will see MS and Sony even compete with the likes of sky/Virgin etc in the future, with both company's offering a box under your TV that gives you a decent IPTV service (or something similar), movies, games, decent video and voice communication services, as broadband evolves and with it technology evolving also I really believe that in 5-10 years time we'll all be chatting to our family and friends via our systems in clear HD video with crystal clear audio, with all of this available in one box slowly this will be the only thing you will want under your TV, and becuase of all the new enhanced entertainment services available via these set-top boxes people (families) will be interested in these more than ever, it won't be just for the hardened gamers any more, anyway that's my (no doubt strange and overzealous) view on what's going to happen in the future.